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Edited Transcript of VIVE earnings conference call or presentation 14-Mar-19 9:00pm GMT

Q4 2018 Viveve Medical Inc Earnings Call

FRANKLIN Mar 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Viveve Medical Inc earnings conference call or presentation Thursday, March 14, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeannie Swindle

Viveve Medical, Inc. - Senior Director of Corporate Communications

* Scott C. Durbin

Viveve Medical, Inc. - CEO & Director

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Conference Call Participants

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* Alexander Lim

Mizuho Americas Llc - MD & Head of Investment Banking

* Anthony V. Vendetti

Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst

* Jeffrey Scott Cohen

Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research

* Jonathan David Block

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Equity Research Analyst

* Joshua Thomas Jennings

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Matthew Gregory Hewitt

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Matthew Jay Wizman

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Suraj Kalia

Northland Capital Markets, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Viveve Fourth Quarter 2018 Financial Results Conference Call. (Operator Instructions)

Speaking today are Viveve's Chief Executive Officer, Scott Durbin; and Jeannie Swindle, Senior Director of Corporate Communications. Following an overview of the fourth quarter and year-end financial and operating results, the call will be opened up for questions.

Please note, this event is being recorded.

I'll now turn the call over to Jeannie Swindle. Please go ahead.

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Jeannie Swindle, Viveve Medical, Inc. - Senior Director of Corporate Communications [2]

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Thank you, operator, and welcome, everyone. Before we begin, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company. Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the corporation's projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are not subject -- and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are described more fully in the company's annual report on Form 10-K and other filings made with the SEC, which are also available on the company's website. In addition, any forward-looking statements represent management's view only as of the date of this conference call and should not be relied upon as representing management's views as of any subsequent date.

I would like now to turn the conference over to Scott Durbin, our Chief Executive Officer.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [3]

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Thank you, Jeannie. Good afternoon, everyone. Thank you for joining us today.

I'd like to begin with an overview of our activities in 2018, provide a high-level overview of our financial results for last year and spend some time speaking to our strategy for 2019. At that point, we will open the call to your questions.

To begin, 2018 was a year of tremendous accomplishments for our team but was also punctuated by some real challenges. While we reported 21% year-over-year revenue growth, with total revenue of $18.5 million from the global sale of 259 systems and nearly 18,500 consumable treatment tips, this was below our full year sales goals set prior to the FDA warning statement that was released last summer, along with marketing letters that were sent to many of our aesthetic competitors.

Long term, given the safety profile of our treatments, our robust clinical evidence and the many years of direct interaction we've had with FDA, we continue to believe these actions are leveling the commercial playing field and providing advantages for us commercially in the U.S. However, in the last half of 2018, we experienced fairly significant commercial headwinds. But importantly, we continue to see improvement in these headwinds as we move through Q4 and Q1 of this year and reiterate our 2019 revenue guidance, which we preannounced earlier this year.

During 2018, we also made significant advances in our clinical programs as we continue to aggressively pursue expanded indications for use in improved sexual function and stress urinary incontinence or SUI in the United States and internationally. While we achieved -- or experienced delays with respect to the enrollment of our VIVEVE II trial in the U.S. last year, we recently announced that it is now fully enrolled.

Additionally, we also produced meaningful, positive 12-month efficacy and safety data in SUI from our pilot and feasibility studies and launched efforts to conduct 2 pivotal registration trials in the U.S. and internationally.

In January of this year, we announced full enrollment in LIBERATE-International for the improvement of stress incontinence and expect to announce final top line data in late July or early August. If positive, we believe this data can be used to achieve regulatory clearances for SUI in over 35 countries around the world, resulting in a significantly expanded market opportunity internationally.

In March, we announced full enrollment in VIVEVE II, as I mentioned, our U.S. trial for sexual function, and expect to announce top line clinical results in April of next year. If positive, this trial could significantly enhance our commercial opportunity in the U.S. with the ability to broadly market our treatment to physicians and patients.

In September of last year, we submitted our IDE for LIBERATE-U. S. to the FDA for SUI, and this proposed trial is designed to enroll approximately 240 patients at up to 25 study sites in the United States. The duration of this study is expected to be 12 months. The company's had 2 rounds of questions from as well as several direct discussions with FDA and will conduct a short acute animal study to evaluate the tissue safety of our SUI treatment protocol. This animal study is very similar to the one conducted prior to our IDE approval last year for sexual function. And once completed, we intend to include this data in our IDE resubmission plan to occur around the middle of this year. We anticipate IDE approval by the agency and initiation of the trial in the third quarter and the final readout of the 12-month clinical data expected late in the fourth quarter next year.

The importance of our clinical programs and label expansion opportunity in sexual function and SUI cannot be understated. 12 million to 14 million women worldwide are candidates for our treatment to improve sexual function, representing a $6 billion to $8 billion total available consumable market opportunity. And SUI is even larger. 25 million to 30 million women worldwide are bothered by symptoms and leakage associated with SUI, representing $10 billion to $12 billion total available consumable market opportunity. We are excited about the clinical progress we made in 2018 and the pending final top line clinical data readouts, which are scheduled over the next 12 months.

In the fourth quarter of 2018, Viveve also enhanced our CMRF technology platform and launched our next-generation system, Viveve 2.0, in the U.S. The Viveve 2.0 is now manufactured by a new large-scale manufacturing partner, which significantly reduces our cost of goods sold versus our first-generation system. While in 2018, we could only sell our 2.0 system in the U.S. and only for a limited part of the year, we are now aggressively pursuing clearances for this system in many international markets, which should continue to contribute to improved gross margins in 2019.

Also in 2018, we continued our market development efforts under our general indication. Viveve was represented at over 15 scientific medical congresses, which resulted in more than 20 clinical presentations and publications, many appearing in peer-reviewed journals that reached gynecology, urogynecology, urology, women's intimate health and aesthetic practitioners throughout the world.

We continue to strengthen our relationships with various medical societies and their respective physician members to build greater knowledge and awareness of our platform and its positive clinical results. Importantly, the strategies and techniques used and presented by these health care practitioners are now being shared to set standards and best practices of women's intimate health treatments around the world.

Also midyear last year, in our effort to defend our robust patent estate, which protects the method of use of radiofrequency energy in vaginal tissue, we've reached a favorable settlement to resolve the company's patent infringement litigation. And as we continue to advance our global commercialization strategy, we intend to continue to protect this valuable IP portfolio.

Finally, in the fall of 2018, we expanded our Board of Directors with the appointment of 2 independent and seasoned executives, both of whom have substantive commercial experience and are making valuable contributions to our future as the company executes on its strategy to grow and gain share of the existing market and move rapidly to expand our indications for use in sexual function and stress incontinence.

I'll now take a moment to provide a high-level overview of our financial results from the fourth quarter and full year 2018. For the fourth quarter, revenue was approximately $4.5 million from the sale of 57 Viveve systems and approximately 4,600 treatment tips. Sales in North America during fourth quarter 2018 accounted for 87% of revenue. And as of year-end 2018, Viveve had a worldwide installed base of over 700 systems and has sold more than 33,000 treatment tips.

Gross profit for the fourth quarter of 2018 was approximately $1.7 million or 37% of revenue. Gross margins were lower in Q4 than in Q4 2017 due to slightly lower ASPs in the United States as a result of our expanded distribution partnership in the U.S. with AMP and unit value mix between systems and treatment tips.

Total operating expenses for the fourth quarter of 2018 was $13.9 million compared to operating expense of $12.2 million in the same period last year. The increase was primarily the result of increased efforts to support the commercialization of our products in the U.S. and clinical studies in SUI and sexual function.

Net loss for the fourth quarter of 2018 was $13.5 million or a net loss of $0.38 per share based on approximately 35.5 million weighted average shares outstanding during the period.

Finally, from a balance sheet perspective, we ended the fourth quarter with approximately $29.5 million in cash and equivalents and believe this will provide us with cash into Q1 of 2020.

For the full year 2018, revenue totaled $18.5 million from the sale of 259 systems and approximately 18,450 treatment tips compared to revenue of only $15.3 million for the full year 2017, a growth rate of 21% year-over-year. Sales in North America for the year accounted for 83% of full year revenue.

Gross profit for the full year 2018 was approximately $7.3 million or 40% of revenue. And again, gross margins were lower in 2018 versus '17 due to slightly lower ASPs in the U.S. as a result of our expanded distribution partnership in the U.S. with AMP and unit value mix between systems and treatment tips.

Total operating expense for 2018 was approximately $52.3 million compared to $41.2 million for the full year '17. Again, the increase was primarily the result of increased efforts to support the commercialization of our products in the U.S. and clinical studies in SUI and sexual function.

Net loss for 2018 was approximately $50 million or a net loss of $1.61 per share based on approximately 31 million weighted average shares outstanding during the period.

In summary, 2018 was a year of strong progress but was punctuated by some real challenges. In January of this year, we completed an organizational realignment, aimed at reducing our operating expenses and conserving our cash while we seek to achieve regulatory clearances in sexual function and stress urinary incontinence. I'm so proud of our current team who are an incredibly talented and dedicated group of people and wish our former colleagues, who were equally as valued, tremendous success in their future endeavors.

As Viveve moves through 2019 and '20, we have 4 core areas of strategic focus: first, continuing our commercial growth through the expansion of our current installed base to health care providers in aesthetics, gynecology, urogynecology and urology while driving increased consumable treatment tip utilization. Today, our sales efforts are concentrated around 14 direct sales reps and 2 distribution partners in the United States, with an expanding network of distribution partners internationally; second, operating more efficiently. The result of the organizational realignment I just mentioned will significantly reduce our operating expenses and cash burn, and these efforts will begin to provide financial benefits in the second quarter. Further, we expect the broader launch of our new 2.0 system in the U.S., along with anticipated international clearances this year, will improve our gross margins in 2019; third, increasing physician and patient awareness of the safety and proven efficacy of our CMRF technology and clinical data through continued publications, increased presence at major medical congresses and developing the support of targeted medical societies; and finally, fourth, continuing our clinical and regulatory progress towards additional indications in sexual function in the United States and stress urinary incontinence in the U.S. and internationally.

As a result of these efforts, we have major clinical milestones forthcoming over the next 12 months, with the final top line data readout from LIBERATE-International coming in late July or early August, the final top line data readout of our VIVEVE II sexual function trial in the U.S. anticipated in April of next year and an IDE approval expected in Q3 to begin our LIBERATE-U. S. trial for SUI.

Operator, this is the end of our prepared remarks, and I would now like to open the call to questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Josh Jennings with Cowen.

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Joshua Thomas Jennings, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [2]

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Congratulations on completing enrollment in VIVEVE II. I was kind of -- I was hoping to just follow up on your prepared comments just on the market dynamics post the FDA letters last year. Anything anecdotally you can share just in terms of -- I know it's modest improvement in the market conditions and customer -- physician-customer reception to vaginal rejuvenation procedures, but if you could help us understand the dynamics that are in play. And I have a couple of follow-ups, too.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [3]

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Sure. If you recall our initial reaction and prepared remarks and commentary around the FDA letters, again, I mean, we have long believed and continue to believe that it has leveled the playing field for us commercially and will do so long term. It did create, as I've mentioned before, some headwinds in the back half of last year, particularly in the women's intimate health specialties of GYN, urogyne and urology. And the momentum we had coming out of Q2 last year within these specialties, I've mentioned, was stalled as we went into the latter part of Q3 and early Q4. We have embarked on a whole host of market development activities aimed at broadening our awareness of our safety profile and clinical data of our treatments, both for sexual function and SUI, in those specialties, and we are starting to, once again, gain some great traction within those 3 -- across those 3 specialties.

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Joshua Thomas Jennings, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [4]

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Great. And just in terms of the competitive dynamics in the U.S. market, I mean, it seems as though some competitors have dropped their product lines. I think there's one competitive platform who's divested from Almirall. Others have stopped marketing as aggressively post the FDA letter. But how does that impact what you're seeing in the field when you're going up head to head in customer accounts? Do you feel like there are less competitors around the hoop? Anything you can share on that front.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [5]

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Again, we think the letters leveled the playing field with respect to marketing tactics. We have seen several competitors drop out of the marketplace, but remember, that started from a basis of probably 12 to 18 globally. So we still see a very crowded market with aggressive tactics, and we have to continue to combat that commercially both in the U.S. and globally. The important thing is we're on the precipice of readouts of 2 registration trials in the next 12 months, which we believe will change the commercial dynamics considerably, particularly because no one has been able to market broadly or directly to physicians or consumers that these procedures exist. And if we're successful through our clinical trials to obtain the label, we will be the first company to be able to do that.

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Joshua Thomas Jennings, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [6]

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Understood. And then just in terms of -- in front of the -- those readouts for VIVEVE II and then LIBERATE-U. S. down the road, you will have a readout of LIBERATE-International later this year, you have the 12-month pilot study data, how can you get that data set out to U.S. customers, clearly, internationally be a different story? Can your sales force still -- and [you'll be] -- not direct marketing of the SUI indication but use those 12-month results from the pilot study and the International-LIBERATE data to potentially see some uplift in SUI demand or Geneveve demand for the SUI indication in front of some of those data readouts in 2020 and beyond?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [7]

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Yes. Sure. Thanks, Josh. Appreciate it. The continued production of robust clinical data in all of our indications is paying dividends both in raising awareness in physician specialties as well as with patients through physicians' own marketing through their practice. We have already presented the 12-month results at medical meetings and poster presentations. We are looking to publish those results. We will do the same thing with the LIBERATE-International data, and that will allow our sales organization to share that peer-reviewed and published clinical data with our potential customers globally. And that is a fairly consistent marketing practice with respect to how we've done it in the past.

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Operator [8]

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The next question comes from Matt Wizman with Raymond James.

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Matthew Jay Wizman, Raymond James & Associates, Inc., Research Division - Senior Research Associate [9]

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This is Matt. I'm on for Jayson Bedford this afternoon. So my question is around the mix of the customer base. Can you speak to how that mix has maybe changed over the past few quarters, more aesthetic-focused versus OB/GYNs? And then how do this mix look OUS versus U.S.?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [10]

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Yes. That's a multipart question there. So it really varies by geography. And so I think it's fair to say that in the United States historically, the mix has heavily been weighted towards aesthetic practitioners, but we see that changing over time and growing to include the GYN, urogyne and urology specialties. In certain areas like Asia, GYN has gotten a lot of traction and is actually sort of the reverse of what's happening in the United States. So it's a mix, and it really depends on the geography, but in the United States, we see it changing over time.

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Matthew Jay Wizman, Raymond James & Associates, Inc., Research Division - Senior Research Associate [11]

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Okay. And then a follow-up. In relation to that same kind of dynamic between U.S., OUS, how does utilization differ? And how have those trends been going? And then maybe any color of how utilization is trending into the first quarter would be great, too.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [12]

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Yes. Utilization has been trending very well. It did hit somewhat of a stall with headwinds created by the FDAs, as I've mentioned, in the back half of last year. We see that improving. Generally speaking, it's pretty consistent between the United States across the installed base and in Asia. Those are the 2 big utilization regions. Europe is much slower. And the Middle East is slower. So those are the 2 dominant regions from a utilization perspective. And unfortunately, I can't comment, sorry, on your -- on sort of projecting what's happening in Q1.

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Operator [13]

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The next question comes from Jonathan Block with Stifel.

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Jonathan David Block, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Equity Research Analyst [14]

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Maybe just 2 for me. Can you talk to the next data point with LIBERATE-International? And will that be the readout in July or August? Or, I guess, what the question really is, is, would there be a 3-month interim analysis that you will see and potentially share with investors?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [15]

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Yes. We most certainly will top line the final 6-month data from LIBERATE-International in July. And we've yet to make a determination about whether we would unblind the data to take an interim look. And so I'll have to defer that. But we will certainly be reporting the top line final 6-month data at the end of July.

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Jonathan David Block, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Equity Research Analyst [16]

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Okay. And then maybe just another stab at the overall guidance. I think you mentioned the $20 million in revenue for 2019, you're reiterating that guidance. A different approach. Is there anything on the cadence that we should be aware of? I mean, here we are in the middle of March. I think, historically, for all of aesthetics, 1Q is seasonally the weakest quarter. So at a high level, Scott, is there anything that you want to call out from maybe a percent of revenue as we think about the 4 quarters of 2019?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [17]

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Sure. You're exactly right, and that's what we've seen historically even as a women's intimate health company. We've seen Q1 be seasonally and historically sort of the lowest contribution to full year revenue. I don't want to comment publicly on quarterly revenue guidance, Jon. We're continuing to -- we're so early in the market development and what we believe our commercial opportunity is, and it's such small numbers that giving guidance for us on a quarterly basis, we've just chosen not to do it. So again, we think even under the operational realignment towards increased efficiency from an operational and sales perspective, we're going to be able to continue to grow this year, manage our cash better and push towards the readouts of all 3 of our registration trials.

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Operator [18]

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The next question comes from Difei Yang with Mizuho.

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Alexander Lim, Mizuho Americas Llc - MD & Head of Investment Banking [19]

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This is Alex on for Difei. I had a question on SUI related a little bit to competitive dynamics. I was wondering if you're aware of any new emerging technologies or modalities that are in development today for SUI?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [20]

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Sure, Alex. Happy to take the question. Look, SUI is a very well-understood, documented from an incidence and prevalence perspective globally indication. There are a whole lot of things being developed in stress urinary incontinence, but I would characterize most of those as being in the physiotherapy category, so things like electrical muscles stim and other modalities to strengthen the pelvic floor muscles. So we view the world of SUI as really bifurcated between physiotherapy on one end of the spectrum and surgical options with bulking agents, slings, et cetera, on the other end, with a vacuum of therapeutic options that exist for woman with mild-to-moderate SUI that can be treated on -- effectively on a noninvasive basis. So while there are many things we're aware of in the physiotherapy category, we are not aware of anything being developed at least as late as we are from a development perspective in that mild-to-moderate category.

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Alexander Lim, Mizuho Americas Llc - MD & Head of Investment Banking [21]

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Okay, great. And then I was just wondering if you could comment on inventory levels. It seems like it's been -- it's gone up a bit in '18 versus '17. Any color there would be helpful.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [22]

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Sure. Inventory levels rose as the balance of December 31, 2018, over the previous year, predominantly because of the preparation of the sale of the 2.0 system. So we were building inventory in the back part of last year in preparation for our anticipated growth and the full launch of our 2.0 system in the United States and various international markets as we achieve clearance in those countries and areas throughout the year. So it's really related to a broader launch of our 2.0 system.

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Operator [23]

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The next question comes from Anthony Vendetti with Maxim Group.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [24]

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Just on the SG&A cuts that you've made, Scott, should we be looking at somewhere around $5 million to $6 million a quarter starting in the second quarter? Or is that about right or a little bit high, a little bit low?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [25]

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On total SG&A? Anthony, is that what you're asking for on a quarterly basis in '19?

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [26]

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Well, maybe on an annual basis, somewhere in the $25 million range make sense? Based on the cuts, how should we look at the cuts in terms of either dollar amount or percentage of revenue?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [27]

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Yes. I think $25 million over the year is in the ballpark from an SG&A perspective in terms of what we're anticipating for 2019.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [28]

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Okay. And then the full enrollment for LIBERATE-U. S., when is that expected?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [29]

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So given what we saw in VIVEVE II, so recall that in December of last year, FDA gave us full clearance. We were stopped at 100 patients. We were trying to enroll 250 for VIVEVE II. FDA gave us clearance for full enrollment in December. In January, we reopened enrollment at 19 sites, and between then and earlier last week, we fully enrolled the trial of 150 patients. So our expectation with respect to LIBERATE-U. S. for SUI is equally as -- we think enrollment will be equally as rapid, if not more rapid. And it's our intention to get our -- get the IDE approved in Q3 and start the study. So we could very well be looking at full enrollment by the end of the year, early into next year.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [30]

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Okay. And then on gross margin, you mentioned you're now with a large contract manufacturing organization for the VIVEVE II. What do you think in terms of basis points or percentage points just that movement -- the move from manufacturing yourself to going to a larger CMO to outsource it? What does that add to the gross margin profile?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [31]

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Well, I'll say this, the 2.0 system, and that's also the 2.0 treatment tips, the cost on that system was reduced by about 30% to 35%.

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Operator [32]

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The next question comes from Jeffrey Cohen with Ladenburg Thalmann.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [33]

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Can you talk about the -- just as a follow-up to the last question. So with the 35% reduction going to the 2.0 system and consumables, the ramifications on margins and how that should play out throughout '19 and '20.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [34]

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Yes. We've stayed away from quantifying the gross margin improvement, and we're anticipating in '19 because it's so -- continues to be so heavily dependent on the unit value mix in any particular quarter and then ultimately at year-end between our 1.0 system, our 2.0 system as well as the mix of consoles and tips. So we're just uncomfortable giving guidance on gross margin improvement other than to say, with the 2.0, it's a 30% to 35% reduction in COGS, and it's -- and we're going to be able to sell it in the United States for a full year this year, as well as we're anticipating several large markets getting clearance for the 2.0 system this year. So that will expand the opportunity for the sale of that system. And so it's really difficult for us given the many moving parts to quantify, and we're just uncomfortable giving guidance on gross margins right now.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [35]

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Okay. Got it. And secondly, can you talk about the commercial force now and the commercial force at AMP, which [should expand this year prior to the readouts]?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [36]

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Sure. So we -- with the restructuring we -- as I mentioned in the prepared remarks, we now have a sale -- direct sales team -- employed direct sales team of 14 individuals. Those -- that footprint is supplemented by relationships with AMP but also another distribution partner. AMP now has somewhere between 20 and 24 reps on the ground and trained in the United States on Viveve. And we continue to look for ways to expand our footprint in an operationally efficient way, for instance, through 1099 reps in various secondary markets, et cetera. But that's a look at the organization as it is today. And then consistent with that, we're obviously continuing to go through a network of distribution partners north of 23 of them internationally, and we're also looking at ways to expand that network as well, particularly as SUI evolves and GYN and urology become more of a call point internationally for us. Oftentimes, some of our existing distribution partners in certain markets are heavily aesthetic-focused, and it gives us an opportunity to expand that to a different partner, a supplemental partner who has a specific calling effort in GYN or urogyne or urology.

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Operator [37]

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The next question comes from Suraj Kalia with Northland Securities.

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Suraj Kalia, Northland Capital Markets, Research Division - MD & Senior Research Analyst [38]

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So, Scott, forgive me, I'm drawing a blank here, and hopefully, you can fill in the blanks for me. For LIBERATE, in general and, for now, international, the 1-hour pad test of -- I presume this is going to follow the standard ICS protocol, right?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [39]

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It is, yes.

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Suraj Kalia, Northland Capital Markets, Research Division - MD & Senior Research Analyst [40]

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And would you all be -- again, please forgive me. I'm drawing a blank here. Would you all be measuring over 24 hours also? Or is it just a 1-hour standing, exertion, the usual protocol, and be done with? Or are we going to see data on the 24-hour numbers also?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [41]

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Yes. So LIBERATE-International has one key primary endpoint, which is the mean change from baseline in the 1-hour pad weight versus the sham-controlled group. Importantly to mention, both of our LIBERATE trial protocols, we believe, are incredibly overpowered. LIBERATE-International's power to detect at 90% power, a 20% difference between the 2 groups. To your question at protocols, both of them, LIBERATE-International and U.S., include multiple secondary, and then for -- in the case of LIBERATE-International, some exploratory endpoints. So within LIBERATE-International, we are going to see, obviously, the primary efficacy endpoint of 1-hour pad weight, and then we are also going to see 24-hour pad weight, 3-day voiding diaries and the various urological patient-reported outcomes that we've used previously in the pilot and feasibility studies such as UDI-6, IIQ-7 and ICIQ.

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Suraj Kalia, Northland Capital Markets, Research Division - MD & Senior Research Analyst [42]

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Got it. So I presume of -- preimposed, we would see the stratification of mild incontinence, let's say, if I use the standardized guidelines, less than 10 ml, and moderate would be -- I believe it's 11 to 50 ml. So we would see preimposed how that chart has shifted, correct?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [43]

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Yes, we will. And an important point to make there with respect to our thoughtfulness of the design of these protocols and in making data-driven decisions through pilot and feasibility studies leading to them is one thing we did see, while small numbers, in our feasibility study and reported in December and talked to, and our KOLs talked to this at our event in December, is that moderate patients experienced a greater reduction in pad weight than the severe -- than the mild patients. So what we did to prevent getting a overly heavily weighted cohort within our patient population of mild is we restricted the inclusion criteria to a minimum of 5 grams of leakage. And I can tell you that, as a result, the baseline characteristics of our fully enrolled patient population had a mean 1-hour pad weight baseline urine volume test of almost 18 mls, so a much more moderate patient population than in our pilot or feasibility study. And we believe that's important to the success of the outcome of the trial.

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Suraj Kalia, Northland Capital Markets, Research Division - MD & Senior Research Analyst [44]

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Fair enough. And finally, Scott, I'll rest my questions here. The Dear Doc letter last year, obviously, it has done the damage it had, right? But there are a number of systems out there, non-Viveve-related systems. Can you give us any color on what is happening with those systems? Are they -- because a lot of them, from what we can see in the field, have already been purchased. Are the clinicians basically saying, "Screw it. I don't want to take a risk, a liability risk, and it is what it is?" Is it still ongoing? Just give us a descriptive analysis of the lay of the land for existing units, even though the competitors, whether it's Hologic or whomever, get out of the market. Any color would be great.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [45]

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Thanks, Raj. Appreciate the questions. Yes. We -- I can only speak to our own installed base. And based on my answer to a previous question, we continue to see good utilization rates. It's a key focus for us in 2019 to work to drive increasing utilization rates, and we are implementing a number of programs to do that. Generally speaking, I don't believe the letters have caused -- physicians who had purchased our system based on robust clinical evidence and a safety profile and multiple registration trials and process with FDA, haven't seen them roll it into the closet and not want to use it because of the safety statement or marketing letters that occurred last summer. We continue to see utilization and, again, are implementing programs to drive that utilization forward as we move through 2019.

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Operator [46]

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The next question comes from Matt Hewitt with Craig-Hallum.

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Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [47]

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A couple of questions for me. First, I guess, just to tag on to that, you mentioned a few different programs to drive utilization. Maybe a little bit of color in that. Are those like volume discounts? Are those better information to the doctors? How do you anticipate or how do you plan to drive utilization?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [48]

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Yes, Matt. There are a variety of programs we're working on. Driving utilization is predominantly a function of training many physicians on how to market to their physician base, and I think we've become incredibly more proficient at that over time. And we're rolling out some of those programs this year, which include group training sessions, our key customer visit program in Denver and just touch points, more frequent touch points with the physician about how things are going, well, how can we help you. And we're about to implement a customer care program that's internal, that will give us more touch points with the physician and help us drive that utilization in the United States.

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Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [49]

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Okay, good. And then I think it was on your Q3 call you've touched on it a little bit here, but the sales cycles length, and obviously, after the FDA. And I think you've commented that you've seen some improvement as the year progressed and even already this year. Where are those? I mean, I guess, if we use maybe early last year, are we halfway back on the sales cycle? Are we 2/3s back? Any granularity there would be helpful as well.

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [50]

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Yes. I -- it's really difficult yet to quantify that in Q1 because it tends to be, obviously, as mentioned before, very seasonally slow quarter with respect to new installs. But I think it's safe to say that it's 50% improved from where it was in late Q3 post the letters.

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Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [51]

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Okay. Well, that's progress. And then maybe one last one for me. Given some of the strategic changes that you implemented in the -- earlier on in the quarter, there's obviously that creates some disruption. But how do you think the team has gelled and bonded together? And have they kind of gotten back to focusing on the business? Or do you think that maybe takes the full quarter and then we see them hit the ground running in Q2?

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Scott C. Durbin, Viveve Medical, Inc. - CEO & Director [52]

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Thanks. Thanks, Matt. Yes, there's always -- when you go through an organizational realignment at any point in time in the year, there's always a little disruption. We've got an incredibly talented sales team. The core of that sales team and our leadership are tremendously dedicated to seeing this company succeed commercially and understands full well the opportunity ahead of us, which lies with the label expansion and regulatory clearances. So we have a dedicated team of 4 teams. They are highly efficient and productive and high producers. As you know about -- it's always 20% of your -- or 25% of your sales team that generates 75% to 80% of your revenue. And fortunately, for us, we were able to retain a very high-quality group. So there is always a little disruption. Q1 is always a softer quarter, seasonally coming off of Q4 for the year in terms of its relative contribution to full year. But the team is out there hitting the ground running, and we're continuing to gain momentum.

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Operator [53]

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This concludes our question-and-answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.